The John Locke Foundation’s latest filing at the US Supreme Court challenges the legal basis for President Donald Trump’s emergency tariffs.
The entire 46-page document is worth reading. This observer noted with particular interest the section targeting trade deficits.
Locke and the Goldwater Institute submitted an amicus, or friend-of-the-court, brief on Oct. 24 in two lawsuits challenging Trump’s tariffs.
The president relies on executive powers triggered by national emergencies.
“Executive Order 14257 asserts that ‘a lack of reciprocity in our bilateral trade relationships,’ as evidenced by ‘persistent annual U.S. goods trade deficits,’ is a ‘national emergency.’ It’s not,” the Goldwater/Locke brief argues.
The United States has seen trade deficits for five decades. “And public deliberation over their significance, and the costs and benefits of restricting international trade, have been ubiquitous in American political life since at least 1976,” according to the brief.
Multiple federal laws address trade. “In other words, there’s no reason the ordinary deliberative process cannot take place. That alone proves no emergency exists,” Goldwater and Locke explain.
The argument could end there. Yet there’s more to say.
“Actually, trade ‘deficits’ aren’t a threat at all,” Goldwater and Locke argue. “America has run a ‘trade deficit’ for 50 years, yet the standard of living is far higher now than it was in the 1970s. The median household income in 1975 was $68,170; it’s now about $98,680 in inflation-adjusted dollars. And the cost of virtually every good has fallen, too.”
“Perhaps the single most important factor in this improvement in the standard of living has been the reduction of trade barriers.”
The brief directly challenges pro-tariff arguments.
“The Government’s contention that ‘[w]ith tariffs, we are a rich nation; without tariffs, we are a poor nation,’ is so contrary to the well-settled principles of economics as understood since Wealth of Nations was published — and as agreed by, in effect, the entire economics profession today — that it fails the rational basis test.”
Even the concept of a trade “deficit” earns the label “economically senseless.” The brief cites North Carolina native Thomas Sowell, one of the nation’s top economic minds.
“If the goods and services available to the American people are greater as a result of international trade, then Americans are wealthier, not poorer, regardless of whether there is a ‘deficit’ or a ‘surplus’ in the international balance of trade,” Sowell wrote in “Basic Economics.”
Trade deficits result from “strong domestic investment or fiscal expansion.” They are tied to “strong relative productivity growth, global savings imbalances and the US dollar’s role as the dominant reserve currency,’” Goldwater and Locke explain.
“More simply, a trade deficit occurs because Americans are wealthy enough to buy products from overseas manufacturers rather than being forced to make those products themselves,” the brief argues. “Americans could cease all international trade tomorrow and force themselves to manufacture all of their own goods. That would make them poorer, not richer.”
Goldwater and Locke look beyond physical products. “[A]s our standard of living has risen, and Americans have emerged as the leaders of technological innovation and the ideas industry, we have tended to trade our services for goods from abroad,” the brief explains. “This isn’t a ‘deficit’ of any sort, but a testament to the advancement of the American economy.”
The word “deficit” is “inapposite.” It’s out of place or inappropriate.
“Buyers get what they pay for and pay for what they get, so there’s no actual deficit,” the brief argues. “Instead, the word is used as a dysphemism: an exploitation of scary-sounding language to make something seem threatening when it isn’t.”
Some see trade deficits harming national security. Americans can’t manufacture necessary items now produced overseas.
“But this, if true, is the fault of domestic barriers to entry,” Goldwater and Locke argue. “There’s nothing to prevent industry from shifting operations to the United States except our own restrictions on the economy. The solution, then, is to reduce our domestic regulatory burden — not to restrict Americans’ freedom to trade.”
“Blocking international trade in order to protect domestic manufacturers against legitimate competition actually undermines American readiness,” the brief explains. Protectionist policies set poor examples for other countries and raise costs for the American military.
“Meanwhile, our domestic manufacturing sector, grown flabby by being shielded from market competition, becomes less fit for any confrontation against foreign enemies,” Goldwater and Locke add.
The case against Trump’s tariffs does not necessarily require a takedown of trade deficit fears. Yet Goldwater and Locke poke gaping holes in flawed economic analysis.
One can hope members of the nation’s highest court will notice.
Mitch Kokai is senior political analyst for the John Locke Foundation.